Irreparable Benefits

When evaluating a request for preliminary relief, courts today consider the degree to which a mistake in denying or issuing the requested injunction might cause an unintentional, irreversible reduction in one litigant’s welfare—what the courts call an “irreparable harm.” Courts do not, however, consider the opposite implication of court error: the degree to which a mistake in denying or issuing the requested injunction might cause an unintentional, irreversible increase in one litigant’s welfare. In the most recent issue of this Journal, I question this asymmetry, arguing that “irreparable benefits” of this sort should indeed enter the injunction calculus. Irreparable benefits are different from irreparable harms, to be sure, but the differences do not justify a legal regime in which the latter are carefully considered whereas the former are entirely ignored.

The intuition behind my argument is simple. Irreparable harm is a factor in preliminary relief because (1) it is unintentional; (2) it is difficult to reverse; (3) it has distributional and incentive implications for the relevant party; and (4) it has incentive implications for similarly situated parties who might ultimately change their behavior in response to the litigation at hand.These same statements, however, apply with respect to irreparable benefits. Irreparable benefits, too, are unintentional, difficult to reverse, and capable of changing both distributional and incentive outcomes. Again, in saying this, I do not mean to imply that irreparable benefits are exactly the same as irreparable harms or even that they will in every case deserve the same degree of judicial attention. But leaving irreparable benefits out of the analysis entirely seems indefensible, given that the difference between an irreparable harm and an irreparable benefit is predominantly a difference from only a private party’s perspective. The former looks like misfortune and the latter like manna from heaven.

I develop the details more richly in the essay, but here let me offer just a simple example, one designed in particular to respond to the obvious criticisms that “irreparable benefits” is mere semantics and that this approach double-counts the same underlying wrong. Suppose that the plaintiff in a given case holds a patent on a chemical process shown to significantly reduce the rate of genetic mutation in a certain type of animal cell. The process at the moment has no specific medical application in humans, but the plaintiff believes that it will ultimately mature into an important human therapy. The defendant, meanwhile, recently began work on a similar chemical process, also hoping in the end to find applications related to human ailments. The plaintiff alleges that the defendant’s process infringes the patent and asks the court to enjoin the defendant’s research. The defendant respondsthat its research is permissible, either because its process does not fall within the scope of the patent’s claims or because the patent is invalid in light of the prior art.

If the patentee moves for preliminary relief, the first hurdle will be to show that something irreparable is at stake. Patent harms are not literally irreparable—most patent-related injuries can be fully compensated by some ex post cash payment—but they are typically deemed irreparable because patent harms are difficult for courts to value. I say more about this in the essay, but for current purposes note that many “irreparable” harms are actually irreparable only in this limited sense. Bankruptcy is widely considered to be an irreparable harm, even though in most instances there is some amount of cash that would fully soothe the wound. Similarly, restraints on employment are regularly categorized as irreparable, although here again there surely is some amount of cash that would make whole a wrongfully restrained worker.

With irreparable harm shown, the next step in the analysis is to apply the three classic factors for preliminary relief and therefore to consider: (1) the likelihood that the plaintiff’s patent is valid and infringed; (2) the irreparable harm that would be imposed on the plaintiff were the court to wrongfully deny relief; and (3) the irreparable harm that would be imposed on the defendant by a wrongful court order to halt its research. The first factor requires little explanation. If the plaintiff’s case is a slam dunk, the injunction should issue immediately, regardless of the relative irreparable implications. Conversely, if the plaintiff’s allegations are preposterous, no injunction should issue, again regardless of the irreparable consequences. Both of these conclusions follow from the basic fact that preliminary relief is not meant to contradict the outcome on the merits. If the merits are clear, the court’s decision with respect to preliminary relief is also clear, and irreparable consequences are simply not relevant.

Things are more interesting in cases where the merits are murky, because in those cases a court must confront the possibility that its ruling with respect to preliminary relief might ultimately turn out to favor the wrong party. This is when the standard for preliminary relief does its heavy lifting. Start with the possibility that the court refuses to issue the injunction at the preliminary stage but then, after a full hearing on the merits, concludes that the defendant’s research did in fact infringe. As the traditional analysis suggests, one cost associated with this errant denial is any irreparable harm that the patentee might suffer. This is a private cost suffered by the complaining patent holder, but it is also a social cost because mistakes like this will over the long run dampen the ex ante incentive to pursue patent-eligible research, discourage patent holders from litigating even valid claims, and likely drive inventors to invest more heavily in costly self-help protections.

There is, however, another cost associated with this errant refusal to enjoin, and that is the irreparable benefit that accrues to the infringer. This cost is one that the traditional analysis overlooks, yet—like the irreparable harm normally considered—it, too, has unintended private and social consequences. Undeserved irreversible gains skew the defendant’s incentives with respect to the question of whether to litigate or settle. They also encourage the defendant to invest further in his research—a wasteful outcome when that research will ultimately turn out to be impermissible. Most importantly, undeserved irreversible gains undermine the defendant’s incentive to “invent around” the patent rather than infringe it. This latter implication is of particular consequence given that the patent system is designed to encourage innovation not merely by rewarding patent holders for their accomplishments, but also by forcing rivals to discover comparable non-infringing substitutes for patented inventions.

Turn now to the opposite type of court error, in which the court issues an injunction at the preliminary stage but then, after a full hearing on the merits, concludes that the accused research was in fact permissible. The traditional analysis focuses exclusively on the irreparable harm suffered by the defendant because of the wrongful injunction. My point, predictable at this stage, is that comparable private and social concerns arise with respect to the plaintiff’s wrongful and irreversible gains. Thus, the traditional approach recognizes that it is important to avoid a wrongful injunction in this setting because a wrongful injunction might irreversibly harm the defendant in a distributional sense and might also skew long-run incentives such as the incentive to pursue borderline but ultimately permissible research. The traditional approach, however, overlooks that wrongful injunctions are also troubling because they might irreversibly benefit the plaintiff in a distributional sense and might distort important incentives relevant to patentees, such as the incentive for a patent holder to litigate a case that is questionable on the merits.

Naturally, there is much more to say on all of these topics. For instance, there are interactions among the various incentives that I considered above, and those interactions amplify some concerns but mitigate others. Moreover, the concept of irreparability is actually significantly more complicated than I have thus far let on. Some errors, for example, turn out to be irreversible when they manifest themselves as undeserved losses but are fully reversible when they manifest themselves as unearned gains. Here, however, I want to stake out only a very basic claim: when evaluating a motion for preliminary relief, any deviation from what will be the ultimate resolution on the merits is relevant, no matter whether that deviation is perceived by the parties to be a benefit or a harm. All that matters is that the deviation is unintended, that it has distributional or incentive effects for the litigants and/or similarly situated parties, and that those effects are difficult for a court to reverse. Irreparable harms obviously fit the bill. But so too, I argue, do irreparable benefits.

Douglas Lichtman is Professor of Law at the University of Chicago, where his research focuses on issues at the intersection of law and technology. He joins the faculty at UCLA this summer.